The development of the East African Crude Oil Pipeline (EACOP) has hit many hurdles since it was initially proposed in 2013. There was great optimism around connecting Uganda with Tanzania to export crude from Uganda's oilfields via the Port of Tanga, Tanzania on the Indian Ocean, but construction has been stalled due to widespread opposition to the project. Many investors have been forced to pull out, leading many to ask whether the project would ever get off the ground. However, EACOP has recently attracted new funding and TotalEnergies continues to be committed to developing the pipeline.
The development of EACOP is aimed at connecting the Tilenga oilfield - operated by TotalEnergies, and Kingfisher - operated by China National Offshore Oil Corporation (CNOOC), with the Port of Tanga in Tanzania. This would help landlocked Uganda to export its crude supplies internationally. Although oil was discovered in Uganda 17 years ago, oilfield development has been slow as there is currently no easy way to export its crude production. If developed, EACOP would be the longest electrically heated crude oil pipeline in the world, measuring 1,443 km.
Until recently, EACOP had $2 billion in funding from the oil companies developing the project but required a further $3 billion to ensure its completion. Several funders backed out in recent years due to repeated delays and widespread opposition to the project, largely due to environmental reasons. Shareholders of EACOP include TotalEnergies, CNOOC, the Uganda National Oil Company (UNOC), and the Tanzanian Petroleum Development Corporation (TPDC).
Year after year, Total and CNOOC have committed to start construction on the pipeline and yet no building has commenced. This is largely because of investment uncertainties, with many commercial banks, such as JPMorgan Chase and BNP Paribas, having opted out of financing EACOP. Over 20 major insurance companies, such as Aegis, Canopius and Britam, have also said that they will not get involved with the project. This has left the Industrial and Commercial Bank of China (ICBC) and Standard Bank's Ugandan subsidiary, Stanbic, with the job of looking for new investors to ensure EACOP goes ahead after more than a decade of planning.
This month, South Africa's Standard Bank announced it would be providing $5 billion in funding for the development of EACOP. This came as a surprise to many considering the long list of banks refusing to get involved in the project after the European Parliament passed a resolution opposing the project in 2022. Nonetheless, the governments of both Uganda and Tanzania hope to complete the project by December 2025.
Nonkululeko Nyembezi, the chair of Standard Bank, stated "We have completed our internal governance process and the environmental and social due diligence, which was a lengthy undertaking." Nyembezi added, "We have all the lenders. There is complete commitment from the sponsors of the oil projects to see it through."
TotalEnergies, which holds the majority stake in EACOP, says that it is acting transparently and hopes to complete the EACOP project with support from the two countries. The Lake Albert region in Uganda has over an estimated one billion barrels of crude reserves, which the Ugandan government wants to develop through the Tilenga and Kingfisher production projects. Total acknowledges that the Tilenga and EACOP projects are "situated in a sensitive social and environmental context and require land acquisition programmes with close attention to the rights of the affected communities." Nonetheless, the French oil major believes it can develop EACOP for the export of Ugandan crude in a thoughtful manner.
However, many environmentalists and citizens of Uganda and Tanzania continue to oppose EACOP. Activists warn that the development of EACOP will devastate thousands of people's livelihoods in Uganda and will exacerbate the global climate crisis. Human Rights Watch (HRW) highlights that once complete EACOP will have dozens of well pads, hundreds of kilometres, camps and other infrastructure, and a 1,443-kilometer pipeline, which will destroy vast amounts of land and the displacement of over 100,000 people. While TotalEnergies has offered compensation to those who would be displaced by the project, a recent HRW report suggests "the project has suffered from multiyear delays in paying compensation and inadequate compensation."
The planned route of the EACOP includes sensitive ecosystems, including protected areas and internationally significant wetlands, posing threats to biodiversity and ecosystems that local communities depend on for their sustenance, according to HRW. In addition, following several years of delays, many environmentalists worry that starting such an immense fossil fuel project now goes against international climate aims.
After more than a decade of delays and controversy, TotalEnergies has finally attracted the funding needed to go ahead with its major EACOP project, with support from the governments of Uganda and Tanzania. However, there continues to be widespread local and international opposition to the project, with huge concerns over the displacement of tens of thousands of people, environmental degradation and the greenhouse gas emissions associated with the project. These challenges will not make it easy to complete EACOP, even with a massive new investment from South Africa's Standard Bank.
By Felicity Bradstock for Oilprice.com
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Felicity Bradstock is a freelance writer specialising in Energy and Finance. She has a Master’s in International Development from the University of Birmingham, UK. More
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Comments
The reasons are:
1- Lack of transparency and waste of resources.
2- Western green policies exert huge pressure on foreign investors not to invest in Africa's oil and gas development so as to force its countries to focus their efforts on renewable energy and reducing their emissions instead.
A case in point is the Nigeria-Algeria gas pipeline which has been talked about for the last 15 years and of which so many memoranda of understanding have been signed and yet nothing materialized.
Dr Mamdouh G Salameh
International Oil Economist
Global Energy Expert